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Abstract: The market digested the latest remarks of Bank of Japan (BOJ) Governor Kazuo Ueda. The USDJPY once again entered the range of 150.00, and the technical signal was mixed, but the uptrend was intact.

Fundamentals

BOJ Governor Kazuo Ueda pointed to a forward-looking approach to monetary policy in his speech to parliament today, in which expectations of rising real wages could be a determinant of policy normalization beyond the current state of affairs.

Kazuo Ueda notes that "real wages may turn positive when a positive cycle of wage inflation begins."

In an in-depth study of the timing of potential policy changes, Kazuo Ueda mentioned, "But as far as the time for us to maintain a large-scale monetary easing policy is concerned... before making a decision, real wages don't have to turn positive."

In clarifying this point, he further elaborated: "If we can definitely foresee that real wages will turn positive in the future, we can make this decision."

Kazuo Ueda also talked about the persistent gap between the current inflation rate and the long-term goal of the BOJ. He said: "From the perspective of trend inflation, there is still a certain distance from our goal of 2%. This is why we continue to be loose on a large scale. "

Market observation: The BOJ's subtle actions show that it attaches great importance to the small adjustment of YCC targets and its impact on the economy.

We believe Kazuo Ueda will patiently wait for further signs of wage inflation and may raise the YCC ceiling as early as the April 26 BOJ meeting (after spring wage negotiations). Moreover, the BOJ's dovish stance on Q4 2023 and Q1 2024 implies that the U.S.-Japan spread will be driven by Fed policy and U.S. data.

The Japanese authorities may intervene to slow the JPY's weakness at the 152.00 level (they have been very outspoken about the BOJ's lopsided moves following its October decision), but our view of higher U.S. Treasury Securities yields suggests that the USDJPY may be close to peaking at 154.00 ahead of the December Fed rate hike.

Technical Analysis

The USDJPY is expected to record its third consecutive day of gains after today's close following a three-day pullback from a multi-month high of 151.72.

The USDJPY continues to rebound today but is still hovering in the range of 148.79 - 151.69. The intraday bias remains neutral and the bullish outlook is unchanged. Further rebound is expected as long as the 148.79 support level is held. Moreover, holding a high of 151.69 will resume the larger uptrend. However, if it decisively falls below 148.79, it indicates that the bulls will be rejected by the key resistance level of 151.93 and further fall below the support level of 147.28.

Mixed technical indicators are not keeping investors bullish. The narrowing of the Bollinger Bands signals that a potential move could happen at any time, but the direction is not yet clear; as the Relative Strength Index has recently fallen below the neutral threshold of 50, while the MACD still lacks strength below the 0-axis.

To attract new buying interest, the bulls must break above the nearby resistance at 151.69 and break above the 2022 top at 151.93. In this case, the price could accelerate its move towards the important resistance trendline area at 153.00. Breaking above it, it will challenge the 155.40-156.60 restrictive range of the March-June 1990 period. It is recommended to buy the dips.

Finally, it is worth considering that a sharp depreciation of the JPY could prompt a new round of foreign exchange intervention by the Japanese authorities.

Trading Recommendations

Trading direction: Long

Entry price: 150.80

Target price: 152.81

Stop loss: 148.70

Deadline: 2023-11-22 23:55:00

Support: 149.19, 148.80, 148.30, 147.88

Resistance: 150.00, 150.26, 150.93, 151.11